Click here: The Weekly Beacon – December 23 2022
We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.
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This weeks issue: Bank of Japan, Japanese Debt, Interest Rates, Inflation, Prices Increasing, Stagnation, Japanese Stocks, Nikkei Index, Japanese GDP, Canadian GDP, Put Call Ratio, Volatility, Bearish Signals, Stock Market Predictions, Banks, Bank S&P 500 Projections, Tesla Stock, Elon Musk, Twitter, Twitter Files, Hunter Biden, FBI & Twitter, Elon Selling Tesla, Tesla Price to Book, Tesla Price to Earnings, Tesla Competitors, Auto Makers, EV Producers, Rivian Stock, Fisker Stock, Lucid Motors, Ford, GM, Ross Gerber and Elon Musk, Phoenix Suns Sale, Buying a Sports Team, Mat Ishbia, Billionaires favorite Asset, United Wholesale Mortgage Stock.
Bank of Japan Christmas Surprise
The BOJ made a surprise policy decision on Tuesday that surprised market participants and economists.
The central bank will allow yields to stray a half point in either direction from its target. Previously it only permitted a quarter point. The target rate by the BOJ remains 0%. This move aims to ease some of the costs of prolonged monetary stimulus.
You might say “so why does this matter, yields stray but historically it’s not by much, this will change nothing”.
Japanese 10-year government bonds fell on Tuesday’s announcement, pushing yields up from 0.25% to 0.41%, their highest level since 2015. The yen at one point strengthened more than 3% versus the dollar.
The BOJ announced that they are not turning hawkish announcing an increase in bond purchases that are designed to bring yields lower. The BOJ also said it would increase monthly purchases of Japanese government bonds (JGBs) to 9 trillion yen ($67.5 billion) per month from the previous 7.3 trillion yen.
Perhaps, the reason that this surprised market participants the most was that the Governor of the BOJ is set to retire in April, and many thought he would not make any major policy decisions on his way out.
Japan was the only developed country across the world that avoided rate cuts to combat inflation (perhaps out of bare necessity). Japanese inflation was 3.6% in October well below European and North American numbers.